Know about Indian Economy | Indian Economy for RBI Grade-B and NABARD Exam 2017

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About Indian economic growth rate & statistics - Important Topics for RBI Grade B & NABARD 2017

Economic and Social issues is a subject which is becoming very important nowadays as many Banking exams are having a section from this particular subject. Like inRBI Grade B Phase II exam and in NABARD prelims there will be a section for this subject so it becomes important to have knowledge of this to score good and for that today we are providing you with the notes on same. The topic for today is “Indian Economy”.

Introduction

India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF). The Government of India has forecasted that the Indian economy will grow by 7.1 percent in FY 2016-17. As per the Economic Survey 2016-17, the Indian economy should grow between 6.75 and 7.5 percent in FY 2017-18. The improvement in India’s economic fundamentals has accelerated in the year 2015 with the combined impact of strong government reforms, Reserve Bank of India's (RBI) inflation focus supported by benign global commodity prices.

India's consumer confidence index stood at 136 in the fourth quarter of 2016, topping the global list of countries on the same parameter, as a result of strong consumer sentiment, according to market research agency, Nielsen. Moody's has affirmed the Government of India's Baa3 rating with a positive outlook stating that the reforms by the government will enable the country to perform better compared to its peers over the medium term.

Market size

India's gross domestic product (GDP) grew by 7 per cent year-on-year in October-December 2016 quarter, which is the strongest among G-20 countries, as per Organisation for Economic Co-operation and Development (OECD) Economic Survey of India, 2017. According to IMF World Economic Outlook Update (January 2017), Indian economy is expected to grow at 7.2 per cent during FY 2016-17 and further accelerate to 7.7 per cent during FY 2017-18.

The tax collection figures between April 2016 and January 2017 show an increase in Net Indirect taxes by 16.9 percent and an increase in Net Direct Taxes by 10.79 per cent year-on-year, indicating a steady trend of healthy growth. The total number of e-filed Income Tax Returns rose 21 percent year-on-year to 42.1 million in 2016-17 (till 28.02.17), whereas the number of e-returns processed during the same period stood at 43 million.

Corporate earnings in India are expected to grow by over 20 percent in FY 2017-18 supported by normalisation of profits, especially in sectors like automobiles and banks, while GDP is expected to grow by 7.5 percent during the same period, according to Bloomberg consensus. India has retained its position as the third largest startup base in the world with over 4,750 technology startups, with about 1,400 new startups being founded in 2016, according to a report by NASSCOM.

India's labour force is expected to touch 160-170 million by 2020, based on the rate of population growth, increased labour force participation, and higher education enrollment, among other factors, according to a study by ASSOCHAM and Thought Arbitrage Research Institute. India's foreign exchange reserves stood at US$ 366.781 billion as on March 17th, 2017, as compared to US$ 360 billion by end of March 2016, according to data from the RBI.

Recent Developments

With the improvement in the economic scenario, there have been various investments leading to increased M&A activity. Some of them are as follows:

1. NITI Aayog, Department of Industrial Policy & Promotion (DIPP) and Confederation of Indian Industry (CII) launched an “India Innovation Index” in line with the Global Innovation Index (GII) to rank states based on innovation by capturing innovation data from all Indian states and updating them regularly.

2. The Union Cabinet, Government of India, has approved the Central Goods and Services Tax (CGST), Integrated GST (IGST), Union Territory GST (UTGST), and Compensation Bill.

3. The Union Cabinet has approved a memorandum of understanding (MoU) between India and United Arab Emirates (UAE), aimed at enhancing cooperation in the field of small and medium enterprises (SMEs) between the two countries, and thereby providing an opportunity for the Indian SMEs to improve and innovate further.

4. The Union Cabinet has approved a MoU between India and the African Asian Rural Development Organisation (AARDO), to implement capacity building programmes for rural development.

5. The Union Cabinet has approved a MoU between India and Hungary, aimed at improving bilateral cooperation in the field of water management, which is expected to develop relations between public and private organisations concerning water resources of both the countries.

6. The Government of India and the Government of the United States of America have signed a MoU to enhance cooperation on energy security, clean energy and climate change through increased bilateral engagement and further joint initiatives for promoting sustainable growth.

7. The Government of India plans to auction 280 mines with an estimated mineral value of over Rs 10 lakh crore (US$ 153.64 billion) in the fiscal year 2017-18, and also use drone technology to prepare topography maps and inspect mines.

8. Indian merchandise exports registered a growth of 17.48 per cent year-on-year in February 2017 at US$ 24.49 billion, according to the data from Ministry of Commerce & Industry.

9. Retail price inflation for February 2017 was reported at 3.65 percent, compared to 5.26 percent a year ago, as per CSO.

10. India's industrial output grew 2.74 per cent year-on-year in January 2017, led by a good performance in the capital goods sector which registered a 10.7 per cent year-on-year growth.

Government Initiatives

1. The Government of India announced demonetisation of high denomination bank notes of Rs 1000 and Rs 500, with effect on November 8, 2016, in order to eliminate black money and the growing menace of fake Indian currency notes, thereby creating opportunities for improvement in economic growth.

2. In the Union Budget 2017-18, the Finance Minister, Mr Arun Jaitley, verified that the major push of the budget proposals is on growth stimulation, providing relief to the middle class, providing affordable housing, curbing black money, digitalisation of the economy, enhancing transparency in political funding and simplifying the tax administration in the country.

3. India's unemployment rate has declined to 4.8 percent in February 2017 compared to 9.5 percent in August 2016, as a result of the Government's increased focus towards rural jobs and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme.

4. The Government of Maharashtra has set a target to double farm income by 2022 through measures like large scale micro irrigation, water conservation, expansion of formal cash credit coverage, crop insurance and agriculture diversification, as per Mr Vidyasagar Rao, Governor of Maharashtra.

5. Numerous foreign companies are setting up their facilities in India on account of various government initiatives like Make in India and Digital India. Mr Narendra Modi, Prime Minister of India, has launched the Make in India initiative with an aim to boost the manufacturing sector of Indian economy, to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors. The Government of India, under the Make in India initiative, is trying to give the boost to the contribution made by the manufacturing sector and aims to take it up to 25 per cent of the GDP from the current 17 percent. Besides, the Government has also come up with Digital India initiative, which focuses on three core components: the creation of digital infrastructure, delivering services digitally and to increase the digital literacy.

Under the Digital India initiative, numerous steps have been taken by the Government of India. Some of them are as follows:

1. The Government of India plans to revamp two of its digital initiatives, the United Payment Interface (UPI) and Unstructured Supplementary Service Data (USSD), to enable consumers to easily make transactions digitally, with or without an Internet connection, and thereby strengthen its push towards making India a digital economy.

2. Prime Minister, Mr Narendra Modi has launched the Bharat Interface for Money (BHIM) app, an Aadhaar-based mobile payment application that will allow users to make digital payments without having to use a credit or debit card.

3. The Government of India has launched a digital employment exchange which will allow the industrial enterprises to find suitable workers and the job-seekers to find employment. The core purpose of the initiative is to strengthen the communication between the stakeholders and to improve the efficiencies in service delivery in the MSME ministry. According to officials at the MSME ministry over 200,000 people have so far registered on the website.

4. The Ministry of Human Resource Development recently launched Kendriya Vidyalaya Sangthan’s (KVS) e-initiative ‘KV ShaalaDarpan’ aimed at providing information about students electronically on a single platform. The program is a step towards realising Digital India and will depict good governance.

5. The Government of India announced that all the major tourist spots like Sarnath, Bodhgaya and Taj Mahal will have a Wi-Fi facility as part of digital India initiative. Besides, the Government has started providing free Wi-Fi service at Varanasi ghats.

6. The Government of India has launched an initiative to create 100 smart cities as well as Atal Mission for Rejuvenation and Urban Transformation (AMRUT) for 500 cities with an outlay of Rs 48,000 crore (US$ 7.47 billion) and Rs 50,000 crore (US$ 7.34 billion) crore respectively. Smart cities are satellite towns of larger cities which will consist of modern infrastructure and will be digitally connected.

7. The number of internet users in India is expected to reach 730 million by 2020, supported by the fast adoption of digital technology, according to a report by NASSCOM.

Road Ahead of Indian Economy

According to World Bank-

The World Bank expects India’s economy to expand at 7.2 per cent this fiscal, but said that the note ban temporarily disrupted growth last fiscal, which slowed to an estimated 6.8 per cent. The report comes ahead of the release of provisional estimates of national income for 2016-17 by the Central Statistics Office (CSO) on May 31.

The CSO, in its advance estimates, had pegged GDP growth at 7.1 percent in 2016-17. The World Bank had in January 2017 scaled down India’s growth forecast to 7 percent for 2016-17 and had estimated growth to rebound in 2017-18 to 7.6 percent. However, it expects the economy to recover gradually and growth to increase to 7.7 percent in 2019-2020.

According to International Monetary Fund (IMF)-

India’s economic growth will be 6.8 percent in 2016-17 — against the official advance estimates of 7.1 per cent — due to demonetisation, if the projections of the International Monetary Fund (IMF) come true. The IMF had earlier said growth in 2016-17 would be 6.6 per cent.

In its World Economic Outlook has been released, the Fund retained it's January 2017 forecast of 7.2 per cent growth in 2017-18, though it is lower by 0.4 percentage points than the 7.6 percent forecast in October, before the note ban. For 2018-19, the growth rate was projected at 7.7 percent. The Fund advised the policymakers to recognise public sector banks' bad debts problems and capitalise them.

Asian Development Bank (ADB)-

The Asian Development Bank (ADB) has stated that India’s growth rate will improve to 7.4 percent during 2017-18 and go up further to 7.6 percent in the next fiscal, remaining ahead of China.

“The impact of the demonetisation of high-value banknotes is dissipating as the replacement banknotes enter circulation. Stronger consumption and fiscal reforms are also expected to improve business confidence and investment prospects in the country,” said the Asian Development Outlook, ADB’s flagship economic publication.

India recorded a growth rate of 7.1 percent during 2016-17, notwithstanding the fears that demonetisation of high-value currency notes of Rs 500/1,000 in November last year would adversely impact the economic growth. In India, the sub-region’s largest economy, growth is expected to pick up to 7.4 percent in the fiscal year (2017-18) and 7.6 per cent in 2018-19, following the 7.1 percent registered last FY.

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